Author: Saikat Datta
Publication: Outlook
Date: August 17, 2009
URL: http://www.outlookindia.com/article.aspx?261232
PSUs are being made the scapegoats, but the
rice scam went beyond their ambit
* The Government Position
* The exports were all planned commercial transactions
* The African countries had not requested India for rice as aid or grant
* PSUs have infringed upon certain conditions in the directorate-general of
foreign trade notifications
Inquiries will be held
The Reality
* Export exemption only for food aid programmes.
If a commercial transaction, why no tenders?
* Letters from Comoros, Sierra Leone, Djibouti state rice is needed for impending
food crisis
* PSUs helpless because of letters naming private companies and addressed
to cabinet ministers; EGoM cleared exports
* Government rejected the Opposition demand for a joint parliamentary probe
"It has been noticed that in some cases
PSUs have infringed (upon) certain conditions contained in the DGFT (directorate-general
of foreign trade) notifications for the export of non-basmati rice. This matter
is being looked into. Inquiries will be held; responsibility will be fixed
and remedial action shall be taken."
-Union minister for commerce Anand Sharma
in his statement on the rice scam in the Lok Sabha on July 30, 2009
Ever since Outlook exposed the scandalous
export of non-basmati rice to 22 "needy" African nations between
January 2008 and May 2009, the rot seems to be only getting deeper. For one,
not only did this trade take place at a time when there was a ban on export
of the grain but, in what was supposed to be a government-to-government aid
programme, three private players were hand-picked, contravening all norms.
The commerce ministry too played its part by getting the export of 10 lakh
metric tonnes (MT) cleared in double quick time. The Outlook investigation
had shown how the entire exercise was intended just to help a private cartel
profit from the then high international price of rice. Why else would state-owned
trading companies like the STC and MMTC be forced to subcontract exports to
chosen private players? Now further proof of this nexus has emerged.
Then Union commerce minister Kamal Nath was
in the know: In his Lok Sabha statement on the rice scam, Union commerce minister
Anand Sharma hinted at state trading companies like STC and MMTC having infringed
upon "certain DGFT guidelines". But were the PSUs alone responsible
or did the then commerce minister Kamal Nath know about what was happening
under his nose?
Documents accessed by Outlook show that Kamal
Nath knew about all the five deals that were eventually signed and delivered
in the 16-month period. In fact, he should have known since he was a key member
of the three-man Empowered Group of Ministers (EGoM) set up by the government
to look into the export of non-basmati rice. And it was then and current DGFT,
R.S. Gujral, who functions under the commerce ministry, who notified each
decision of the EGoM specifying how much rice could be exported by a PSU to
a specific African country.
In fact, a letter from the West African nation
of Sierra Leone (dated March 31, 2009) was addressed directly to Kamal Nath
seeking 30,000 MT non-basmati rice (valued at Rs 110 crore) due to a food
crisis in that country. The letter clearly recommends the Delhi-based Amira
Foods as the company which should be exempted from the then existing ban on
exports for this purpose. To quote: "We (Sierra Leone) further request
that the concession to export/ship be given to M/s Amira Foods (I) Ltd whom
we have nominated as the shippers of the rice concession to be granted to."
(Kamal Nath didn't respond to a detailed questionnaire faxed to his office
and residence seeking his comments.)
This order became one in a series of concessions
that Amira Foods bagged in exporting the banned non-basmati rice, including
a consignment to the East African nation of Comoros in mid-2008. Here too
the country was allotted 25,000 MT of rice to be exported under the food aid
programme through MMTC. But as the deal unfolded, it revealed a manipulation
that went far beyond MMTC. The fact is that while the PSU tried its best to
resist the manipulations in the export deal from the top, it was pushed into
a corner and forced to accommodate private players.
The Comoros Deal-The Twists and Turns: In
January 2008, the EGoM agreed to exempt a consignment of 25,000 MT of non-basmati
rice to the Union of Comoros, a small African nation comprising of four principal
islands just off the eastern coast of Africa. The DGFT issued a notice on
January 24, 2008 (Notification no. 73 [RE-2007]/2004-2009), clearing the export
along with that of 9,000 MT to Mauritius through MMTC. In February 2008, the
PSU floated a limited tender for exporting rice to Mauritius and Comoros.
While the export to Mauritius went through smoothly, the Comoros deal began
to spin out of control.
Interestingly, MMTC raked in profits in the
Mauritius deal, buying the rice from the market for $368 per MT and selling
it to Mauritius for $455 per MT. The profit margin: $87 per MT. "This
was probably the highest profit that MMTC has ever made in a rice export deal
in its entire history," a senior commerce ministry official told Outlook.
Meanwhile, in the Comoros deal, MMTC floated
a similar limited tender. It got bids ranging between $468 and $475 per MT
and in turn offered to sell to Comoros at $495 per MT. This offer was valid
till March 10, 2008. In an April 15, 2008, fax, sent by the ministry of external
affairs and cooperation, government of Comoros, to the Indian embassy in the
Madagascar capital Antananarivo, the Comoros government pointed out that the
price of $495 was too high. It also stated that it could not meet the deadline
of March 10, 2008, because of paucity of funds and would highly appreciate
"if the Indian government could positively consider lowering the proposed
price (of $495)".
A Unilateral Agreement: But a month later,
MMTC received an already signed agreement inked without its knowledge where
Comoros had agreed to buy the 25,000 MT of rice (worth Rs 28 crore) through
three private Indian companies at $640 per MT! The agreement, dated May 22,
2008 (MMTC/RICE/EXP/02/ 2008-09), appointed MMTC as the seller; Amira Foods
Ltd, with its office in Sultanpur Estates, Shivnath Rai Harnarain Ltd and
Emsons Ltd as the "shippers" and the Comorian trading agency ONICOR
as the "buyer". Strangely enough, the agreement had already been
worked out and signed by the "shippers" and the "buyers",
minus the MMTC. This deal raises essentially two questions:
How could the price be decided and an agreement signed between private Indian
companies and the Comoros government without the participation of MMTC, the
PSU mandated by the EGoM and a DGFT notification to export?
Why did Comoros seek a reduction in the price of $495 per MT offered by MMTC
and agreed to buy it at $640 per MT from private companies?
PSUs' Profit Margin Fixed Unilaterally by
Private Player: Mysteriously, the Comoros agreement also stated unilaterally
that MMTC's profit margin would be only $10 per MT. Which meant that while
the rice would be sold at a rate much higher than what MMTC had sold to Mauritius,
its margin per MT would fall from a high of $87 per MT to $10. Strangely enough,
MMTC's profit margin was written into the typed document by hand and signed
by a 'P. Guha'. The 'P. Guha' turns out to be Protik Guha, vice president,
Amira Foods! (Outlook contacted Guha on phone but he said he was in a meeting
and would get back, but didn't).
Pushed into a corner, MMTC shot off several
letters to the MEA in June 2008 pointing out how Comoros had turned down the
much lower price it had quoted and opted instead for a much higher rate, and
how its profit margin too had been pre-decided at $10 per MT. In response,
two letters arrived simultaneously at the MMTC headquarters. The first was
a two-page letter dated June 10, 2008 (113/CG/ND/08), from the consul-general
of Comoros in India, K.L. Ganju, asking the PSU to process the agreement.
"On inquiry from the supplier (read Amira Foods etc), it has been informed
that the contract papers are pending with MMTC." Ganju wanted them processed
immediately. (Despite repeated efforts, Ganju remained unavailable for comment).
A similar letter to MMTC came from Narinder Chauhan, joint secretary (East
and South Africa division), on the same day. The note (No. 1689/JS [E&SA]/08)
pointed out that this export deal had been struck "with the direct intervention
of the President of Comoros and the Prime Minister of India" and so it
had to be processed immediately.
When MMTC wrote back to the MEA (Letter No.
MMTC/AGRO/RICE/EXP/ COMOROS/08/02), pointing out details of its original offer
and the entry of private players, it received a reply from K.N. Ramachandran,
an under-secretary in the MEA. In this letter dated June 16, 2008 (No. IV/I0L/4/2008),
it was pointed out that since the contract had already been signed between
the government of Comoros and the private Indian companies to supply rice
at $640 per MT, "MEA had no further comments to offer." Instead
it requested that "MMTC may please facilitate export of the consignment
of rice to Comoros". With no choice in the matter, the PSU complied.
The Need for a Joint Parliamentary Probe Anand
Sharma promised Parliament that there would be an internal inquiry. But Opposition
parties as well as the MPs who had filed a calling attention motion on the
rice scam are not satisfied. When Outlook spoke to BJP leader Gopinath Munde,
CPI(M) MP Basudeb Acharia, BJD MP Bhartruhari Mahtab and Samajwadi Party MP
Shailendra Kumar, they all said that a scam of this nature which impinged
on the nation's food security called for a joint parliamentary probe which
they had demanded.
But the government rejected this outright,
leading to the Opposition staging a walkout. Such a probe could well release
a can of worms; an internal inquiry, on the other hand, would be more convenient.
It can be easily manipulated and the blame put on PSUs. The big sharks, meanwhile,
can continue to roam the ocean of corruption.
